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19 Aug 2005 - 00:35

Alan Greenspan on rising inequality

I'm going to start posting this email from NYC Math Forum at NYC HOLD once a month:

In the matter of preaching to the choir, C-Span has a video of Alan Greenspan's testimony to the House Joint Economic Committee. There is a fascinating exchange between Greenspan and Senator Reed about the divergence in income between skilled/supervisory workers and unskilled workers. They agree this is a very serious problem. At one point, Reed asks what short term policies can be implemented to "enhance the incomes of most of the workers of America.

I transcribed about two minutes of testimony which you can hear for yourselves, starting around minute 34:00 of the video clip.

Greenspan:

Well, Senator, I don't think there are short term policies, other than the ones we typically use to assuage those who fall into unemployment or policies in the tax area in which we endeavor to redistribute income.

The basic problem, as we have discussed previously, as best I can judge, goes back to the education system. We do not seem to be pushing through our schools our student body at a sufficiently quick rate to create a sufficient supply of skilled workers to meet the ever-rising demand for skilled workers which means that wage rates are accelerating. But the very people who have not been able to move up into the education categories where they become skilled overload the lesser skills market and cause wages to be moving up well below average.

The consequence, of course, is an increased concentration of income. And, as I have often said, this is not the type of thing which a capitalist democratic society can really accept without addressing. And as far as I am concerned, the cause is very largely education.

It is not the children because at the 4th grade they are above the world average. Whatever it is we do between the 4th grade and the 12th grade is obviously not as good as what our competitors abroad do because our children fall below, well below, the median in the world, which suggests that we have to do something to prevent that from happening and I suspect, were we able to do that, we will indeed move children through high school, into college, and beyond in adequate numbers. As indeed we did in the early post WW II period, such that we do not get the divergeance in income which is so pronounced in the data we currently looked at.



Rising inequality has been Topic A for months now (make it years) with the WALL STREET JOURNAL & the NEW YORK TIMES both running major several-part series on the subject. Rising inequality alond with declining social mobility.

Well, what is the reason for rising inequality and declining social mobility?

Is it just that the rich get richer? (Which seems to be the thesis of everything I read, but don't go by me.)

I'm with Alan Greenspan. It's basic supply and demand. If you don't have enough highly educated people to fill jobs requiring highly educated people, those wages go up.

If you have too many highly uneducated people to fill jobs where advanced education isn't a requirement, those wages go down.

Now I'm going to indulge in some psychologizing, which generally speaking I don't approve of.

I think the reason journalists don't bring up this possibility is that journalists, being highly educated, and NOT being highly educated when it comes to math & economics (I speak from experience), just naturally tend to assume that of course the wage gap between them and the custodial staff is widening; what journalists do is lots more valuable. (I'm only dinging journalists here because I'm talking about journalism. I'll hazard a guess that just about every highly educated person other than Alan Greenspan thinks the same thing.)


Alan Greenspan on rising inequality
rising inequality, part 2
rising inequality, part 3
median income families UCSC students
another statistics question
channeling the Wall Street Journal
Financial Times on US college costs
Economist on US higher ed
The Economist on rising inequality in universities



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how about, just maybe, dare i say it,
unrestrained capitalism is working as designed?
workers can't afford medical care
because, gosh, profit-based insurance
is practically a contradiction in terms?
(for example ... don't get me started ...)

one thing's for sure (in my mind):
this whole "not enough skilled workers"
thing is a complete red herring.
there are plenty of struggling Ph.D.s
here in my neck o' the woods ...
but most of the good jobs, here as elsewhere,
have been eliminated and replaced with
three crummy ones (tenured faculty with adjuncts
in my own case; examples abound elsewhere).
let capital run the show and the show'll be run
solely for the benefit of those with capital.
it ain't rocket science, folks.
now try to imagine greenspan admitting that<BR. maybe, just maybe, we need more socialism.
it is to laugh. or weep. take your pick.

-- KtmGuest - 19 Aug 2005


following up on my own post
(rude, i know ... i'm not a gentleman):
here's a quote i found just now
(from "las vegas gleaner"
http://www.lasvegasgleaner.com/las_vegas_gleaner/
quoted in "house of labor"
http://houseoflabor.tpmcafe.com/story/2005/8/17/14056/8185 ).

All that stuff you hear about Las Vegas being shallow and kitschy? That's all true. But in Southern Nevada people with a high-school education--and sometimes less--working in the service sector can make a decent living, drive a dependable car, own their own homes, have a retirement plan and get great health care for themselves and their families without paying any premiums--all thanks to organized labor. How's your city doing?

-- KtmGuest - 19 Aug 2005


I don't quite follow....have good jobs been eliminated?

Or good jobs haven't been eliminated because of unions?

-- CatherineJohnson - 19 Aug 2005


I don't have the impression capitalism is designed to work in any way at all, though maybe economists would disagree.

hmm

That's a good question, actually.

Do economists think capitalism is designed to work in a certain way?

Or has a certain purpose?

My naive understanding of capitalism has always been that it's not especially designed.

Ed--who began life as a socialist & is now a highly reluctant capitalist--was telling me the other day that one of the things you find, in economic history, is that no matter where you go, or what the circumstances, you will find markets popping up. They just appear. Prisoners in concentration camps, apparently, had markets.

My understanding of people like Greenspan--and again, this is a naive understanding--is that they believe there are circumstances under which capitalism works best and is most fair, fair meaning you don't have an underclass.

His analysis is that everyone must be provided with rigorous public schools.

On another subject, I hope it's not rude to follow up one's own comment with another comment.

I do it all the time!

-- CatherineJohnson - 19 Aug 2005


A guest: "this whole 'not enough skilled workers' thing is a complete red herring. there are plenty of struggling Ph.D.s here in my neck o' the woods"

Why do you assume that a the set of [people with a Philosophy doctorate] strongly overlaps the set of [skilled workers]? My experience is that that correlation is rather weak. In at least one case, this higher education would seem to have neglected to address the purpose of the shift key, for instance. That would seem a useful skill for a "skilled worker", especially a worker whose job is communication, capital letters providing, as they do, certain useful cues to meaning structure. It seems to me that the job of professing (professor: one who professes) would necessarily include communicating.

Having said that, I'll agree that our higher education system is broken, but I suspect that my preferred set of fixes would overlap with yours in no way whatsoever.

"workers can't afford medical care because, gosh, profit-based insurance is practically a contradiction in terms"

Profit-based insurance works just fine, but the point of insurance (generally) is to cover the unexpected, not to cover routine expenses. I carry car insurance, but it doesn't cover car washes, oil changes, or new tires, for example. Nor does it cover all major car-related expenses (the necessity to replace the car when its cost-benefit ratio reaches an unfortunate point, for instance).

The point of medical insurance (as with other insurances) should be to provide some certainty about how much money you'll need to spend, not to reduce that amount. In fact it is at least arguable that insurance does reduce costs, but the cause is packaged care purchase, which provides some certainty to the the income stream of the doctors, providing value to them.

And my city seems to be doing just fine, but Detroit (for instance) seems not to be experiencing the wonders of the long-term consequences of organized-labor dominance of the low-skill labor market that you describe. I have a theory that accounts for both of these; do you?

-- DougSundseth - 19 Aug 2005


the point of the quoted passage --
which i thought was obvious --
is that vegas is exceptional in the US
because labor is strong there.

i find my own remarks much easier to read
than DougSundseth?'s despite the lack of caps.
at least my lines aren't twenty words long.
oh, forget it. he's just so much smarter
? than i am i shouldn't even bother to try.
hasn't he got tons more money?
doesn't that prove it right there?

profit-based insurance works fine?
wll, i don't mind paying for my own pills
(in principle) ... but if i need an operation
to survive my options'll be:
die or bankrupt my family.
meanwhile, my counterparts in
the rest of the industrialised world
just, well, get the operation. gee.

to bring the point back to education:
why is socialism ok here? how come, in particular,
even opponents of public schools
-- or is it teacher unions? --
generally seem to take it for granted
that schools should continue to be
publicly funded ("vouchers")?
i don't understand it. i'm not kidding.

p.s. "markets" \not= "capitalism".

http://vlorbik.com

-- KtmGuest - 19 Aug 2005


while i'm at it, i might as well make
the extravagant claim that public schools
are also working as designed:
as a disappointment *machine* for keeping
the rabble in line.
hell, higher ed too, increasingly.
at least one of the johnsons is already
reading (the invaluable) john taylor gatto
(http://www.johntaylorgatto.com/index.htm );
the best source i know on the higher ed end is
disciplined_minds by jeff schmitt
(http://disciplined-minds.com/ ).

this aspect of academic life was brought home
to me very plainly when during my first year
in the pros i taught a section of freshman calc
and realized while grading the first exam
that it had become my job to tell a certain
young man that he was unlikely ever to be an MD.
(he'd told me he was planning on med school;
it was plain he'd been lied to systematically
as to what he'd have to do to get there.
probably it wasn't much of big deal in his life
-- he told me a year later he wanted to be
an actor -- but disturbing enough to *me*
that reading schmitt's book gave me a real
"ah-ha, so *that*'s it!" moment.)

-- KtmGuest - 19 Aug 2005


he'd told me he was planning on med school; it was plain he'd been lied to systematically as to what he'd have to do to get there

What did people tell him???

I find that shocking.

I have actually been told, on the QT, that teachers here are counseled, in so many words, not to tell parents their kids are doing poorly.

In our case, I'm sure the point is to keep parents off the staff's back, assuming this report is true, of course.

I'm inclined to believe it is true, because when Christopher failed two of his 6 unit tests in 4th grade, no one said boo. I was working under deadline, and managed to miss the Unit 5 fail; thank heavens I was awake for the Unit 6 results.

I found it astounding that I wouldn't hear anything at all from the school with my child flunking fully 1/3 of his math coursework.

I also know, because I've been told directly, that the Middle School believes the Grade School puts too many kids in accelerated math, and thus inflates parents' & students' perceptions of their ability & achievement...

So my sense is that our school has at least an informal policy of soft-peddling bad news.

As to John Taylor Gatto--well worth reading. (I'll post his stuff as I get to it.)

I continue to find our schools almost astoundingly opaque.

I do think there's a major path dependency issue...Ed says there's a big Revenge of the Chronically Put Down factor as well.

As to Ph.D.'s & an under-supply of skilled labor, I'm with Doug on this one. For years I've seen income curves showing that income rises like mad until you get to the Ph.D. level, when it declines.

I'd say that's the exception that proves the rule of supply and demand & education: how much demand is there for people with Ph.D.'s in film studies? Not too much. So how much do we get paid to do film studies? Nothing at all, in my case.

otoh, I have all kinds of skills & knowledge I gained from higher education that have made me (often, not always) well-paid and steadily employed.

-- CatherineJohnson - 19 Aug 2005


On vouchers:

"generally seem to take it for granted that schools should continue to be publicly funded ("vouchers")?"

I think that most opponents of teachers' unions, public schools, or badly run public schools (there is obviously an overlap between these groups, but they aren't synonymous terms) would agree that there is a substantial public benefit to a generally well-educated population. They would also say that we're paying for and not getting one now. So let's take a look at some of the reasons for support for vouchers:

A first group, that which opposes badly run public schools, has watched a series of well-publicized attempts to fix the disfunctionalities of the system fail miserably. While they would like the public schools to work, the current path is not producing results. They hope that competition will either fix or replace the bad schools, and they are unwilling to sacrifice their children's educations on the altar of the neighborhood school.

A second group, that opposes teachers' unions, whether because of a philosophical objection to the monopolistic trade practices of said unions or because they have watched the unions oppose every serious attempt to fix the problems of the system of the last several decades, would prefer not to be forced to pay the state while sacrificing their children's educations on the altar of the "union movement".

A third group, that opposes public schools more generally, feels that since their property taxes are being confiscated anyway (and when has the government stopped confiscating money from a source once it has begun?), they would really prefer not to pay twice to get their children a single education. Even though not paying in the first place is a better choice, that's not realistic. Vouchers are a compromise position.

This list is obviously not exhaustive, and my own views are probably partially reflected in each of the above. But each is at least a consistent argument.

On rigor and expectation management:

I absolutely agree that schools should both teach rigorously and let children (even, or perhaps especially, adult children) know when their work is not good enough to support a particular life path. This is different than a judgement about aptitude, however. Aptitude affects how hard you'll have to work, and may set a ceiling on your advancement in a field, but it certainly doesn't set a floor. Expressed judgements about aptitude are subject to the sort of abuse that my wife suffered when she was in high-school, "You just aren't smart enough for that; you should get married and have children."

When it comes down to it, only in school does anyone really care how hard you work. In the real world, the issue is results, not effort. In some cases working harder will be enough, in others not; in both situations it is better to know now than later.

-- DougSundseth - 19 Aug 2005


thanks, D.S., for your carefully reasoned remarks.
i've followed up on another thread of KTM here:
http://www.kitchentablemath.net/twiki/bin/view/Kitchen/OnlinePoll
. i'm abandoning this thread because issues like
"rigor and expectation management" never
even crossed my mind. it appears to me
(under correction as always) that you've just
flat-out made-up the distinction between
"aptitude" and, um, what was it again? --
yeah, yeah, whatever. geez. try harder.

yours in the struggle. v.

-- KtmGuest - 20 Aug 2005


thanks for ignoring that last outburst.
i mean it. hey, KTM, could you delete that
(and this) for me as a personal favor?

the distinction between "aptitude" and "performance",
in particular, appears upon a moment's thought
to've been an important one in the current context.
for the record, i think mr. sundseth & i *agree*
that smacking down students by telling 'em
what we think about what they can or can't do
amounts to malpractice.

sorry for being such a jerk. probably i should
forbid myself from posting once the sun
is a certain point beyond the yardarm.

still -- what's up with the highfalutin' language?

-- KtmGuest - 21 Aug 2005